Author: Gan Jia Ci
On 26 May, Ducatus Cafe graciously invited Block Asia to attend their event (Cryptocurrency: Don’t be scammed!) as a guest speaker for the day.
Ken Chua, the Digital Marketing Manager of Block Asia, shared his expertise with the audience. With the heavy influx of new coins in the blockchain space, Block Asia sees a need to educate its audience and spread awareness of the risks involving cryptocurrencies via its platform.
For the vast majority who were not able to attend the event, a glossary of Chua’s talking points will be published here.
Types of scams:
- Over The Counter (OTC) Scams
- Ponzi Scams
- Initial Coin Offering (ICO) Scams
- Phishing Scams
- “Free ETH” Scams
OTC trading occurs when two or more interested parties conduct a physical meetup to discuss and buy or sell coins concurrently. It usually involves high-value transactions that can run up to millions of dollars.
This scam takes place when the robber, disguised under the veil of a seller, mugs an interested buyer, the latter usually carrying large amounts of cash on hand.
Other examples of OTC scams also include individuals impersonating a telegram administrator from cryptocurrency companies to conduct OTC trading.
Ponzi scam is a fraudulent investment scam that occurs when a representative guarantees a new investor high returns that are usually funded by capital from previous investors instead of real business activities or company revenue. Victims usually fall for ponzi trickery due to promises of large short-term gains.
One of the more infamous ponzi cases includes Bitconnect, a coin that was shut down after a severe market crash in January. It was accused of being a ponzi scheme due to various pyramid marketing structures, causing people to boycott the coin completely. The coin was one of the leading coins in the cryptocurrency market before it crashed by 65% and eventually shut down.
With increasing popularity in decentralised crowdfunding projects, many startups can now gather ICO investors to support their innovative financial models while promising the latter attractive profits in return.
However, with the lack of regulation, these companies can easily up and leave with the culminated amount raised. This is also known as an “exit scam”.
One of the more common forms of deceit, phishing scams ensue when the swindlers trick victims into revealing their personal information such as passwords or, in the case of cryptocurrency, digital wallet private keys.
Many of the scams take place in the form of fake websites that mimic the real, authorised ones. Under the guise of an authentic wallet website, scammers are able to trace victims’ private wallet keys once they type their digits into the website. Finally, with the private keys, these swindlers will be able to steal victims’ coins.
“Free ETH” Scam
One of the most popular scams out there, the con-artists reply to verified handles on Twitter using similar usernames and profile pictures, offering “free Ethereum” to investors who must first offer something in return.
Vitalik Buterin, the founder of Ethereum, has stressed, on many occasions, that he does not offer free coins. Many founders of coin giants have also added a “not giving away ETH” jingle beside their names.
How To Prevent Scams
Chua provided his input and suggestions to prevent investors from falling for tricksters.
“Always look out for potential red flags. Check, again and again. Make sure you’re always on a secure website, and do your due diligence. Read up on the latest news and past cases to educate yourself on the possible red flags that could occur in the future. Never put all your eggs in one basket. Look out for sketchy offers that promise 100% gains within a short period.”
He added, “If the deal is too good to be true, it’s probably not true.”